CHAPTER 13 ARBITRATION PROVISIONS IN MINING AGREEMENTS

• Jurisdiction: United States

Mining Agreements Institute
(May 1979)
CHAPTER 13
ARBITRATION PROVISIONS IN MINING AGREEMENTS
John L. Neff
Witherspoon, Kelly, Davenport & Toole
Spokane, Washington
SYNOPSIS

TABLE OF CONTENTS Page No.

I. INTRODUCTION

II. ARBITRATION STATUTES

III. FEDERAL ARBITRATION ACT

1. Applicability of Federal Act

2. The Sword and Shield

3. Jurisdiction and Venue

4. Substantive Law—The Prima Paint Case

5. Province of the Court

6. Arbitration Procedures

7. Judgment on Award

8. Relief from Arbitration Award

IV. STATE ARBITRATION STATUTES

V. CHOICE OF LAW PROVISION

VI. OTHER CONSIDERATIONS

1. Multiple Party Contracts

2. Waiver

VII. A CLASSIC CONTEST

VIII. THE AGREEMENT TO ARBITRATE

IX. CONCLUSION

APPENDIX — American Arbitration Association Rules 13A-a

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I. INTRODUCTION.

Provisions regarding arbitration of disputes have proliferated in mining agreements and mining leases, and whether this is by conscious choice of the draftsman or the parties, or is simply because of rote copying of prior agreements and forms, is not always clear. Generally, the suspicion is fairly strong that the arbitration provision has been inserted by someone with only a very rudimentary concept of what is really involved. This is unfortunate because in many cases the arbitration provision may prove to be the most important paragraph in the agreement. Arbitration, as a method of settling disputes, has been much touted as a faster, less expensive, and more expeditious method of bringing a dispute to an end than would be the case in judicial proceedings. The appeal is obvious, particularly to layman and law professors who somehow visualize being able to choose an individual who is familiar with the terminology and trade practices, who will informally hear out the parties and make a decision, avoiding the tedium of lengthy court proceedings. Unfortunately, establishing a method to assure the selection of arbitrators with the wisdom of Solomon, a highly developed sense of justice, or the judicial temperament of an experienced trial judge, has not been evolved. Nonetheless, arbitration has particular appeal in jurisdictions in which the court dockets are overcrowded, and lengthy delays are common.

Arbitration of disputes has become firmly ensconced in the area of labor relations, and, until recently, was a fairly-well accepted procedure in construction contracts. Lately some of the major corporations with enough bargaining power to dictate terms have refused to permit arbitration clauses in their construction contracts, because of the unsatisfactory results achieved. In this area the effect of an arbitration clause has often been simply to eliminate the basic contract, after the fact, and cause a renegotiation of the contract terms. The question is typically not whether the contractor will get more, but only how much more.

The usefulness of arbitration in the context of mining agreements depends partially upon the questions to be arbitrated. However, limiting subject matter that may be subject to arbitration if an arbitration clause is included in an agreement may prove to be very difficult. This is particularly true because of the rapid expansion of the hegemony of the Federal Arbitration Act.

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II. ARBITRATION STATUTES.

In general, as a product of the common law, in the absence of a statute an agreement to arbitrate was generally considered to be a part of the law of remedies, and was generally treated as an agreement of questionable enforceability. Many state courts, for various reasons, refuse to enforce arbitration agreements. The effect of a statute, both on the federal and state levels, has been to create substantive rights in the agreement to arbitrate, making such agreements specifically enforceable by providing for stay orders in related litigation, and providing for orders specifically enforcing the agreements to arbitrate. In effect the statutes are all directed toward the same result, the specific enforcement of an agreement to arbitrate. Deficiencies in the agreement to arbitrate related to appointment of arbitrators, procedures to be followed, effect of an award, and other like matters, are generally solved one way or another, to force the parties to conduct an arbitration proceeding, which typically has the power of the courts applied to the award, when reduced to judgment. This is true even though at the time the dispute arises it is all too typical that one party wants to arbitrate, and the other party wishes to utilize normal judicial procedures.

III. FEDERAL ARBITRATION ACT.

At this time, because of the pre-emption doctrine, any examination of the subject of arbitration must commence with the Federal Arbitration Act. Because of a series of cases decided in the last twelve years there is little left of the state arbitration laws, which have effectively been pre-empted in most instances by the Federal Arbitration Act. That Act is relatively short, appearing in 9 U.S.C., §§ 1-14. It was originally enacted on February 12, 1925, following popularization of arbitration in the state of New York under the New York arbitration statutes.

1. Applicability of Federal Act.

The Federal Arbitration Act, § 2, provides as follows:

A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

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The term "commerce" is defined in § 1 as follows:

"...commerce", as herein defined, means commerce among the several States or with foreign nations, or in any Territory of the United States or in the District of Columbia, or between any such Territory and another, or between any such Territory and any State or foreign nation, or between the District of Columbia and any State or Territory or foreign nation..."

To show the broad reach of the federal act it should be compared with the commerce clause of the U. S. Constitution:

To regulate commerce with foreign nations, and among these several states and with the Indian tribes.

With the expansion of the reach of the commerce clause during the period of the 1930's and 1940's there is almost no transaction outside of the reach of the definition of commerce in the federal act. See Metro Industrial Painting Corp. v. Terminal Construction Co., 287 F.2d 382 (C.A. 2 1961) (involving commercial painting contract in Florida); Sears Roebuck & Company v. Glenwal Company, 325 F. Supp. 86 (S.D. N.Y. 1970), aff'd 442 F.2d 1350 (C.A. 2 1971) (construction of store in New York).

2. The Sword and Shield.

The Federal Arbitration Act, as well as the Uniform Arbitration Act, and most other state statutes in regard to arbitration, contains the dual aspects of a provision providing for stay of court proceedings, and for application to the court to enforce the arbitration agreement even when other litigation has not been commenced. These provisions in the Federal Arbitration Act are contained in §§ 3 and 4. Since these two provisions are the critical provisions, they are reproduced here in full:

§ 3. Stay of proceedings where issue therein referable to arbitration

If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay

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the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.

§ 4. Failure to arbitrate under agreement; petition to United States court having jurisdiction for order to compel arbitration; notice and service thereof; hearing and determination

A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction under Title 28, in a civil action or in admiralty of the subject matter of a suit arising out of the controversy between the parties, for an order directing that such arbitration proceed in the manner provided for in such agreement. Five days' notice in writing of such application shall be served upon the party in default. Service thereof shall be made in the manner provided by the Federal Rules of Civil Procedure. The court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement. The hearing and proceedings, under such agreement, shall be within the district in which the petition for an order directing such arbitration is filed. If the making of the arbitration agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall proceed summarily to the trial thereof. If no jury trial be demanded by the party alleged to be in default, or if the matter in dispute is within admiralty jurisdiction, the court shall hear and determine such issue. Where such an issue is raised, the party alleged to be in default may, except in cases of admiralty, on or before the return day of the notice of application, demand a jury trial of such issue, and upon such demand the court shall make an...